S&P 500 & Nasdaq Hit as Trump’s Tariffs Go into Effect

The S&P 500 dropped 1.8% and the Nasdaq fell 2.6% as new US tariffs on Canada, Mexico, and China took effect, triggering fears of escalating trade tensions. Bond yields slid to their lowest since October, while oil prices continued to decline as Brent crude fell to just over $70 per barrel. Bitcoin retreated to $84,220 after briefly nearing $95,000, as enthusiasm over a potential US cryptocurrency reserve faded.

Equities

The FTSE 100 rose 0.7% on Monday, closing at a record high as defence stocks rallied following European leaders’ commitment to increased military spending. The FTSE 250 gained 0.3%. BAE Systems led the FTSE 100 with a 14.6% surge, while Rolls-Royce climbed 4.4%.

The broader FTSE 350 aerospace & defence index rose 8.1% to a record high. The market responded positively to news that France and Britain will present a proposal for a partial ceasefire in Ukraine.

Senior Plc’s stock rose 8.5% after it confirmed advanced negotiations for the sale of its aerostructures business. Meanwhile, Bunzl fell 8.8% to a near seven-month low after reporting a drop in annual profits.

The S&P 500 fell 1.76%, its worst session since December, while the Nasdaq dropped 2.64% and the Dow Jones declined 1.48%. Losses deepened after Donald Trump confirmed that 25% tariffs on Canada and Mexico would take effect on Tuesday, with reciprocal tariffs starting next month.

The ISM manufacturing PMI fell to 50.3 in February from 50.9 in January, raising concerns about economic momentum. The technology sector saw heavy losses, with Nvidia dropping 8.7%, Amazon falling 3.4%, and Intel sliding 4% despite early gains after reports that Nvidia and Broadcom were testing manufacturing with the company.

Tesla also erased early gains and fell 2.84%, despite Morgan Stanley reinstating it as a “top pick” in the auto sector.

Forex & Commodities

The Canadian dollar fell to $1.4541, its lowest level in a month, while the Mexican peso dropped 0.5% to 20.821 per dollar after Donald Trump’s 25% tariffs on Canada and Mexico took effect. China retaliated with 10-15% tariffs on US goods, while Canada and Mexico are set to announce countermeasures. The Australian dollar weakened to $0.6187, a one-month low, and the yen strengthened to 149.33 per dollar. The euro held steady at $1.0481, while sterling traded at $1.2693 ahead of the European Central Bank’s policy meeting on Thursday. Traders are expecting another 25 basis point rate cut, adding to five previous reductions since June.

Gold prices eased slightly, with spot gold down 0.1% at $2,892.00 an ounce, after a strong overnight session driven by safe-haven demand. US gold futures were flat at $2,902.20, as investors weighed the impact of trade tensions on inflation and Federal Reserve policy. JPMorgan reaffirmed its $3,000/oz target for Q4 2025, citing long-term structural demand.

Oil prices fell after reports that OPEC+ will proceed with an April output increase of 138,000 barrels per day, its first since 2022. Brent crude dropped 0.8% to $71.05 a barrel, while West Texas Intermediate (WTI) crude fell 0.6% to $67.98. The US tariffs on Canadian energy exports, China’s retaliatory measures, and the pause in US military aid to Ukraine added to market uncertainty, with analysts warning of potential oversupply. Goldman Sachs suggested that even if US sanctions on Russian oil were eased, production constraints under OPEC+ would likely limit any increase in supply.